# Margin-based portfolio rationalization raised profit by 143%

> Revenue and profit rising while costs fall: cutting the items that destroyed margin, instead of cutting price or volume, was treated as a single optimization problem.

Sector: Manufacturing. Client: Manufacturer with a portfolio of thousands of items (anonymous, per Orion policy).

## Results

- **143%** — increase in profit for the period
- **16%** — increase in total revenue
- **26%** — reduction in total production cost

## The challenge

Almost half of the portfolio operated at a negative margin: of 2,651 related items, spread across 231 groups, 48.92% were losing money. The problem was not visible item by item, because actual cost, tooling and logistics combined differently in each group, and no spreadsheet could capture the cross effects between them.

Cutting by instinct was risky: an item that looked unprofitable could be carrying the fixed cost of an entire group, and removing it would make results worse instead of better. The decision required evaluating the portfolio as a system, not item by item.

## The approach

Orion approached the problem globally, simultaneously optimizing which items and groups to keep, based on the actual cost of each one within the structure of the whole portfolio rather than each item's standalone accounting margin.

The optimization pointed to a portfolio of 1,181 items in 131 groups, down from the original 2,651 items and 231 groups, with the negative-margin share falling from 48.92% to 19.08%. The result was not a trade-off: total revenue rose 16%, total production cost fell 26%, and profit for the period more than doubled.

## Project objectives

- Identify items and groups that destroy margin when evaluated at actual cost.
- Redesign the portfolio to maximize profit, not just revenue or volume.
- Reduce the negative-margin share of the portfolio without compromising service.

## About the company

- 2,651 items in 231 groups, before
- 1,181 items in 131 groups, after
- Negative margin: from 48.92% to 19.08%

## Solution applied

[Portfolio Optimization](https://orionotimizacao.com/en/solutions/portfolio-optimization) — The ideal product mix to maximize margin, meet commercial constraints and balance channels.

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